The international monetary fund has given its agreement to Pakistani Government for scaling down the current year tax target by PKR 119 billion rupees. The Finance minister Mr. Ishaq Dar told in a news conference, that IMF has revised the tax target to Rs 2.691 trillion against the original target of Rs 2.81 trillion. The IMF mission Chief for Pakistan Mr. Jeffery Frank and Mr. Ishaq Dar also announced the successful conclusion of the sixth review of Pakistani economy.
However, it was not decided whether the GOP will cut down its Public Sector Development Program (PSDP) by the same amount of the budget deficit ceiling 4.9% of GDP will be eased.
The next loan tranche will be released despite the government of Pakistan did not met their commitment to introduce energy and tax reforms and give independence to State Bank of Pakistan. Mr. Dar also claimed that FBR’s performance is majorly affected due to decline in Petroleum product prices. The impact of this decrease in tax collection; due to reduction in petroleum product prices is estimated around PKR 68 billion out of which PKR 28 billion is recovered through increasing sales tax. The government has raised the tax to 27% from original 17%.
Since the beginning of this year, while the experts criticized the unrealistic tax collection targets of PKR 2.81 trillion; the FBR officials and economists are even uncertain of achieving the lowered tax target of Rs 2.691 trillion.
Both IMF and Government of Pakistan have agreed to boost the FBR’s tax collection, however, they didn’t comment whether this would be achieved through levying more taxes.
The IMF chief also commented that FBR missed the half yearly target of Rs 1.195 trillion for the first half year. Mr. Dar, however, was of opinion that government had met all the performance criterion and indicative targets and structural benchmarks.
Mr. Frank said that although overall there is an improvement in Pakistan’s economy, however, foreign exchange reserves are required to be increased. State Bank of Pakistan is needed to be given more self-rule. All December end performance criteria were met and Pakistan needs no waiver. The IMF will release the seventh tranche of $ 518 million dollars to Government of Pakistan.